What killed Myspace? Is Facebook next?

With over 800 million users worldwide, Facebook has all but annihilated its oldest, closest rival Myspace, and left cyberspace littered with the remnants of social networking start-ups that tried to match its success. But how?

What made Facebook so much better, and how did it manage to topple a company like Myspace which was expected to generate over US$1-billion in 2007? Overall, Facebook had a number of key successes which helped to elevate its status from young upstart to key financial player. A lot, however, has to do with a number of crucial mistakes made by Myspace during its early social media boom.

The most significant factor that led to MySpace’s demise had nothing to do with Facebook at all — Facebook just happened to be in the right place at the right time to pick up the pieces. Instead, it had more to do with Google and the financial dealings of the company after Rupert Murdoch’s News Corporation bought MySpace in July 2005. Unlike Facebook, which relied on venture capital, Myspace was dependent on advertising revenue.

In 2006, Myspace entered into a US$900-million advertising deal, which saw Google become the exclusive search engine provider for the site. In an interview earlier this year with Business Week, MySpace co-founder Chris DeWolfe admitted that the agreement forced the fledgling company to double the number of adverts on the site, cluttering the interface with often highly risqué and inappropriate images. Along with user anonymity, this appears to have lent itself to the mass perception that Myspace was a breeding ground for pornography and taboo behaviour. What resulted was a mass exodus toward the cleaner domain of Facebook, in which users were encouraged to extend their offline relationships online, rather than entertaining anonymous online contacts.

By this stage, Facebook was emerging as a significant competitor, especially when it began opening up to outside developers to help implement new site applications, like Farmville.

Not to be outdone, Myspace began developing its own applications to augment its features. Instead of branching out, however, Myspace turned inwards, relying on its own developers to design and implement new apps. This led to a number of issues, least of which was the lack of testing and maintenance on products, which usually led to buggy and slow applications. Overall, Myspace was playing catch-up to a younger, more popular rival, and little could prevent the inevitable; MySpace was out, Facebook was in.

Today, Myspace is down to a mere 41-million users worldwide, and is focussing its efforts on becoming a social entertainment hub, rather than a social network. There’s no doubt that Facebook is in control. Myspace even gives you the option to use Facebook Connect when logging into its new-look site, but that doesn’t mean that Facebook will maintain its dominance. The fall of MySpace is a lesson that Facebook should heed, especially with the emergence of Google+.

Like the Myspace of the past, Facebook is becoming more commercial and moving away from its original clean and uncluttered interface, while Google+ couldn’t be more minimalist in its approach. Even more importantly, Google has invested millions into making cloud computing a success. Google+ is just another piece in Google’s collaborative web, and one can only guess how successfully Facebook will adapt, or if it will be Myspace all over again.